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   It is impossible for this Commission to work out a completely detailed system of supply for the Government. Rather, we attempt in this report to outline such a system, and recommend an organization which can develop an effective mechanism.
   The deficiencies of the Federal supply system stem in part from deficiencies in companion staff services, namely, the personnel and fiscal activities.
   In our report on Personnel Management, we recommend a personnel organization, policies and practices which, if adopted, should contribute immeasurably to the solution of the problem of securing competent personnel to fill key supply positions. No other steps which the Government might take will contribute more to improved supply operations than the adoption of measures which will help insure the selection and retention of competent supply personnel.
   Our report on Budgeting and Accounting recommends an improved system of appropriating funds and preparing agency budgets. The adoption of these recommendations will promote more realistic budgeting and accounting for supply activities and will eliminate detailed regulations which tend to hamstring the operations of imaginative supply officials.
   In addition to these recommendations which are included

in other reports, we outline below seven recommendations which, if adopted, will lay a sound basis for the development of an efficient system of supply in the Federal Government.

Recommendation No. 1:

Enact legislation which will repeal the conglomeration of existing statutes, clear the books or present restrictive and often conflicting decisions and regulations, and provide the basic principles for an effective supply system.

This legislation should be designed to provide a charter for the Bureau of Federal Supply in the Office of General Services (see recommendation No. 4 below) and to permit the development of effective and economical Federal supply practices.

Recommendation No. 2:

Enact legislation to apply the principles of the Armed Services Procurement Act of 1947 to buying by all agencies.

This act permits contracts to be negotiated under specified circumstances and conditions, and raises from $100 to $1,000 the ceiling for purchases without competitive bids.
Such legislation is fundamental to achieving worthwhile improvements in supply operations. This authority should be lodged in the President.

Recommendation No. 3:

Establish a Supply Policy Committee composed of representatives of the Bureau of Federal Supply and the National Military Establishment to coordinate civilian and military supply operations.

   Although the Commission recognizes that the wide differences in supply problems make it undesirable to unify civilian and military supply activities, there is a need for close coordination between the two systems. There are many items of common use, such as medical supplies, where purchase and storage by one or the other (but not both) would result in major savings. Our task force report on Medical Services recommends strongly a single agency to purchase all medical supplies, military and civilian. It is also desirable, as pointed out earlier, for civilian and military agencies to coordinate their activities as they relate to specifications, property identification, and traffic management.
   It is for these reasons that the Commission recommends that a Supply Policy Committee be established. This Committee should not be formalized by statute but should serve at the pleasure of the President.
   It would be the function of the Committee to develop policies and rules on supply operations common to both the military and civilian agencies and to make Government-wide purchase, stores, inspection, testing, and other assignments. It would assign responsibility for special programs such as stock piling and would settle disputes which might arise in

connection with the integration of civilian and military supply systems.
Coordination between civilian and military agencies is particularly important in the development of a standard property identification for items of common use. For example, in purchasing such items as medical supplies and equipment which are used in large quantity by both the military and civilian establishments, this Committee could assign the task of purchasing such items for the Government as a whole to the agencies which are best suited to make the purchases.

Recommendation No. 4

Establish a Bureau of Federal Supply in the Office of General Services with competent personnel and clothed with adequate authority to provide the leadership necessary to achieve in the executive branch an efficient supply organization which would also coordinate with the National Military Establishment.

A major function of this office should be the formulation of policies and regulations, on behalf of the President, to govern the supply operations of the executive branch. Its task would be to view the supply problems of the executive branch as a whole, and to adopt such policies and to provide such assistance to the agencies as will bring about a supply system which is effective and economical.
We do not recommend a specific internal structure for the Supply Bureau. We believe that its organization must be

geared to existing circumstances and therefore must be decided upon by the Director of General Services and the Director of the Bureau of Federal Supply. We do, however, outline the activities which should be assigned to the Bureau. (See chart, Proposed Supply Agency.)
A primary responsibility of the Bureau would be to assist the President in the formulation of policies, regulations, and practices which are to govern all phases of the supply function in the executive branch and to make administrative audits to determine compliance therewith. Through its membership on the Supply Policy Committee it should assist in the formulation of those policies, regulations, and practices which are to be common to both the civilian and military agencies. In addition it would carry out the following responsibilities.

Purchase and Storage Activities

Recommendation No. 5

We recommend that this unit:

a. Assign responsibility for the purchase or storage of commodities peculiar to the use of an agency to the agency best suited to make such purchase or to store such commodities.

b. Designate certain agencies to purchase specified supplies for all agencies.

c. Award contracts to vendors for common-use items, these contracts to be utilized by all agencies in the purchase of such items.

d. Handle the purchasing for small agencies whenever it is economical to do so.

e. Operate a Nation-wide system of storehouses to supply departmental and field services with those common-use items which can be most advantageously and economically be distributed through such storehouses.

f. Purchase, through consolidated orders for all Government agencies, those items in which volume purchases result in appreciable savings.

g. Develop master forms of bid and contract documents, of which all suppliers should be informed and which can be incorporated by reference into each bid and contract.

Traffic Management Activities

Recommendation No. 6

We recommend that this unit:

h. Advise all Government agencies on traffic management problems.

i. Represent all agencies in negotiating rates with the carriers.

j. Represent all agencies in cases before the transportation regulatory bodies.

k. Advise agencies as to reasonableness of carriers' bills

l. Prepare and maintain appropriate manuals and guides relating to traffic management activities of Government agencies.

Specifications Activities

Recommendation No. 7

We recommend that this unit:

m. Serve as a Secretariat for a coordinating body of representatives of selected agencies including the National Military Establishment on Federal specifications. Such a board, if desired, would approve Federal specifications and recommend for the President policies and procedures governing their preparation.

n. Maintain a master list of qualified products, that is, products which meet Federal Specifications.

Property Identification Activities

Recommendation No. 8

We recommend that this unit:

o. Serve as secretariat for a coordinating body made up of representatives of selected agencies including the National Military Establishment. Such a board would recommend to the President policies and procedures for developing a single commodity catalog for the Federal Government. It should also recommend rules and regulations for its mandatory use.

Inspection Activities

Recommendation No. 9

We recommend that this unit:

p. Determine what products should be inspected.

q. Make inspection assignments to specific agencies.

r. Make testing assignments.

s. Prepare inspection manuals.

t. Develop rules and regulations on inspection policies and methods.

Proper Utilization Activities

Recommendation No. 10

We recommend this unit:

u. Develop property use, maintenance, and replacement standards and rules and regulations, and determine the extent to which property disposal functions should be delegated to civilian agencies.

Recommendation No. 11

Strengthen the authority of the Secretary of Defense so that he may provide the leadership necessary for improving the supply operations of the National Military Establishment.

The three military departments expend over 5 billion dollars annually for new supplies and equipment or 80 percent

of the total amount so expended by the Government each year. Therefore, if substantial savings are to be realized in supply operations, improved practices must be adopted by the military departments as well as by the civilian agencies.
The Commission believes that the wider sphere of responsibility given to the Munitions Board under the National Security Act of 1947 is a step in the right direction. This charter should be expanded, however, to cover all phases of military supply including purchasing, storage and issue, traffic management, specification, inspection, property identification, and property utilization.

Recommendation No. 12

It is specifically recommended that the National Security Act of 1947 be amended so as to strengthen the authority of the Secretary of Defense in order that he may integrate the organization and procedures of the various phases of supply in the constituent departments of the National Military Establishment.

Recommendation No. 13

Remodel civilian agency supply organizations along the general lines proposed for the Bureau of Federal Supply.

It is not intended here to propose a rigid pattern which should govern the supply organization of the civilian departments and agencies. The size and nature of agency supply organizations will vary with the type and quantity of supplies which the agency requires. The Supply Bureau,

however, should have the responsibility of reporting to the President the provisions made by the various agencies for the adoption of policies outlined herein.

Recommendation No. 14

Eliminate the present surcharge levied on the price of commodities purchased through central supply organizations for the Government as a whole and the departments and pay the administrative costs of such organizations through direct appropriations.

At the present time the Bureau of Federal Supply is required to levy a surcharge of 12 percent of the purchase price on commodities which agencies purchase through the Bureau. A similar practice exists in many of the departments which have central supply organizations handling purchasing on a department-wide basis. This practice has discouraged use of economical centralized facilities and fostered the growth of costly supply units throughout government. As long as the practice of levying surcharges exists, agency officials will persist in the impression that they are able to purchase more economically than the central organization, since they do not take into account the overhead and operating costs of their own purchasing organizations.

* * * * *

The reports of the Federal Supply Project (appendix B) makes detailed recommendations for the improvement of supply operations. These recommendations should be of

inestimable assistance to Federal officials concerned with supply, and it is upon these officials that the primary burden for an improved system rests. In order to free these officials so that they may proceed with such a program, it will be necessary for the President and Congress to adopt the recommendations which the Commission has outlined in this report.

Savings

The task force reports that great savings will be realized if its recommendations are adopted.
The task force also estimates that it should be possible to reduce stores inventories, both military and civilian, by over 2,500 million dollars. This would permit a cut in personnel engaged in stores activities. The adoption of the recommendations relating to traffic management would produce additional savings. Adoption of the recommendations relating to inspection, specification, property identification, and property utilization would also achieve appreciable savings in personnel and operating costs.

The Commission has had Volume I of the task force report on the Federal Supply System printed and submits this separately as Appendix B.
Supplemental papers are also submitted separately in typescript.

Acknowledgment

The Commission wishes to acknowledge the assistance of the following persons.

FEDERAL SUPPLY

Project Leader

Russell Forbes, formerly professor and director of the Division of Research in Public Administration, New York University; Commissioner of Purchase, New York City; and consultant to the director, Bureau of Federal Supply, United States Treasury Department.

Staff Assistants

Robert R. Nash, formerly director, Purchase Analysis Division, Purchasing Department, Ford Motor Co., Detroit, Mich.

Joseph L. Ernst, formerly purchasing agent, Rochester Board of Education, Rochester, N. Y.

Herbert L. Brown, formerly director, Purchase Analysis of the Lincoln-Mercury Division, Ford Motor Co., Detroit, Mich.

John V. O'Connell, formerly supervising engineer for the Bureau of Stores, Purchase Department, City of New York.

J. H. Geary, formerly assistant manager of stores, Erie Railroad Co., Hornell, N. Y.

Leon J. Jacobi, inspection and standards engineer, the Detroit Edison Co., Detroit, Mich.

Dana M. Barbour, on loan from the Division of Statistical Standards, Office of the Budget.

Frank A Cisar and Valadimir S. Kilesnikoff, Division of Statistical Standards, office of the Budget.

Keith G. Barr, on loan from the property Management Section, Division of Administrative Management, office of the Budget.

Bell and Ussery, traffic consultants, Investment Building, Washington, D. C.

Sidney D. Goldberg, attorney, formerly associated with the Department of the Interior and the Office of the Budget.

Advisory Committee

W. Z. Betts, director, Division of Purchase and Contract, State of North Carolina.

Harry Erlicher, vice president in charge of purchases, General Electric Co.

Thomas D. Jolly, vice president in charge of purchases and engineering, Aluminum Co. of America.

R. C. Haberkern, vice president in charge of purchases, R. J. Reynolds Tobacco Co.

Carl Ilgenfritz, vice president in charge of purchases, United States Steel Corp. of Delaware.

George A. Renard, executive secretary-treasurer, national Association of Purchasing Agents.

John P. Sanger, vice president in charge of purchases, United States Gypsum Co.

Charles E. Smith, vice president in charge of purchases, New York, new Haven & Hartford Railroad.